So Many Topics - What to Choose

There really is so much going on to write about during this unprecedented year of the pandemic.  As I write this column, we have just (mostly) finished one of the most acrimonious elections in history, are in the midst of a third wave of Covid-19 (or second depending on how you define it), have endured more than normal catastrophic weather events, and continue to deal with issues around racial inequality and division.  Wow!  That is so much, to put it mildly, extraordinarily challenging “stuff” to deal with.  In any event, I don’t know what I could add that hasn’t already been written, said, posted, etc. regarding so many of these issues.

I’d rather write about some good stuff, especially as we head into Thanksgiving in about a week.  Even though most of us will not be able to get together with extended families as we may have in the past, I think that there are many good things for which to be grateful. To name a few, in no particular order:

• Technology, such as Zoom and Google Meet, has allowed us to stay “connected” safely.  (To those of us tired of these virtual meetings, I saw a tweet that said something like, “Whenever I get fed up with Zoom, I just close my eyes and pretend that I am at LaGuardia”.  Good point!)
• We have been incredibly blessed by the heroic medical personnel, first responders, and essential business employees who have worked in dangerous conditions, often to exhaustion, for the benefit of those stricken.
• Despite our polarized society with its stark political differences, Congress and the White House actually got together and passed over $2 trillion in stimulus/support to help the millions who have been thrown out of work, through no fault of their own.
• Operation ‘Warp-speed’ (to develop a vaccine) is stunningly living up to its billing with Pfizer and Moderna announcing in the past couple weeks extraordinarily good results with their vaccines in their latest trials.  Instead of the usual many years for a vaccine to be developed, these have been developed and look to be distributed in less than one year.
• The inevitability of the long-term market advance continuing to new heights… eventually.

Stock Markets Are Headed Higher over the Next Several Years and Decades

As noted above, this is on my gratitude list. I am really, really grateful for this inevitability.  This is what makes investing work and why we always focus on, and invest for, the long run and not the unknowable short run.  If this year doesn’t prove the futility of trying to make short-term predictions, I don’t know what will.

While we seem to bounce from crisis to crisis, it is easy to focus on all the negatives of today.  Yet, we know that the long term for the United States remains quite positive; this difficult year does not change the long-term uptrend for our economy and our markets.  We will eventually “get to the other side” of this pandemic.  Markets will continue to recover to reflect the recovering economy which will eventually spread the benefits of economic growth to more and more of the smaller companies.  If there is one thing that I’ve learned from studying markets and successful investors over the years, it is that the best investors never lose their optimism.  In fact, they realize that the darkest times, such as last March-June, create the greatest bargains for those who are willing to focus on the long term and see through all the near-term gloom.  (As an aside, I do believe that the picture is also rosy for all free societies with capitalistic economic systems.  This provides us with great opportunities to diversify.)

Last spring, I wrote a few letters in the heat of the market panic as the crisis rapidly unfolded.  In the letter that was emailed to clients on March 13, 2020 (also included in our March 2020 newsletter), I mentioned that this was the fourth major, scary, never-seen-before crisis that I had experienced in my career.  The first three were: the Black Monday stock market crash in 1987, the bursting of the Dot-com bubble followed by the 9/11 terrorist attack during the extended 2000-02 bear market, and then the Great Financial Crisis of 2008-09.  I emphasized in my letter that, just like the previous three, we will eventually move beyond the current crisis to new economic and market heights.  Some people questioned me, claiming that this pandemic really was different.  I’d say they were right and wrong.  Every one of these was a new crisis like none seen before.  But the important thing is that the United States has a multi-century history of overcoming seemingly unreachable obstacles.  It’s not the crisis that governs but rather the people and the economic systems.  As we know now, the market recovery from the fastest 30%-plus decline was also the fastest in history.

As I write this, we are inundated with market-impacting news that is both positive and negative.  What do we do?  This answer is easy – ignore the news!  To us long-term investors, the news is irrelevant.  We can relax remembering that the long-term growth is inevitable.  Any sharp short-term moves just provide opportunities for automatically rebalancing financial portfolios.  Happy Thanksgiving!